Juan de la Serna says he is often asked about his relationship with Che Guevara. His father was a cousin of a man who was a defining figure in the area’s history in the ’60s. As the president of Latin America’s most valuable company, he has marked the business world in some way. Mr. de la Serna has been with Mercado Libre since its inception and proudly says he was the company’s first employee born in a garage.
– How would you define the Mercado Libre ecosystem, including Mercado Pago?
– Everything has changed since 1999, and at that time there were almost no Internet users. And no one bought online. I had to be persuaded to use this site. A major milestone occurred in 2004 when we introduced Mercado Pago to solve payments when someone buys something from another user. And a few years later, logistics solutions emerged that could solve not only when someone paid, but also how they were delivered. These two milestones began to significantly change the dynamics within Mercado Libre. The Pago market has expanded beyond the scope of the Libre market. Currently, Mercado Pago has five times more sales outside of the Libre market than within the Libre market. We began offering collections solutions to businesses and merchants beyond our operations within Mercado Libre, followed by the birth of QR, automatic user-to-user transfers, and rewarded accounts in 2019. This meant tremendous innovation. Because, until that moment, there was no way to get rewarded for your balance unless a fixed term agreement was made with your bank. Currently, 18 million people receive some form of benefit on their Mercado Pago account balances every day.
– How do you deal with growth in that dimension?
-We started out as an online auction company and basically transformed into a technology company that provides e-commerce and digital finance solutions. And one of our big goals has to do with digital inclusion in areas where very few people have access to financial products. This is an opportunity to economically engage the millions of people in Latin America who today have credit cards and paid accounts and can request loans. Progress was also made in improving the logistics network. This is unique and has made the whole business easier for those who make Mercado Libre a way of life and sell their products, as well as for consumers, who increasingly receive better packaged products in less time, at a lower cost, and often for free. This is because we offer free shipping on certain levels of purchases in every country in which we operate.
-What kind of relationship do you have with the engineers who support technological breakthroughs?
-Mercado Libre has 20,000 developers. The technology team is clearly at the heart of everything we do.
-What is the role of artificial intelligence?
-We are making a remarkable revolution. And it spans all areas of the free market. Across all sectors, we are focused on finding solutions that make people’s lives easier through AI, including improvements in productivity, efficiency, and costs. In fact, we’ve been doing it for years. So even before anyone introduced the term AI, we started with something called machine learning models. Mercado Libre allows you to ask questions of the person selling the product. From there, the model starts learning what the questions are, what the answers are, and begins answering them directly on behalf of the seller. Buyers receive a response within seconds, as if it had been given to them by the seller, improving their purchase. The legal department sorts what comes in and reassigns it to people specifically dedicated to that task, such as the ticket desk. There are also online negotiators who will resolve your problems, for example complaints, much faster and much cheaper. For technology teams, more and more lines of code are being developed by artificial intelligence solutions. What you have to learn is how to ask an artificial intelligence what you want, something called a prompt. Being a prompt is almost like a new job. So instead of spending hours trying to figure out what to write, whether it’s an asterisk, a hieroglyph, or a peso symbol, you can just tell one of the solutions that exists in artificial intelligence to generate the code for what you want to do. And it’s evolving, and a solution that looked like the last Coca-Cola in the desert 90 days ago may no longer exist today. And then there will be new models that will improve all the models and all the efficiencies and productivity that they create. We created a team to provide solutions to non-tech teams. I don’t remember anything happening so fast and yet so revolutionary.
– What do they do in Latin America?
-Brazil, then Mexico, then Argentina. Brazil is probably the most competitive country in the world in terms of business volume, not profitability. So we’ve been competing with Amazon since 2014, and today Amazon is number four, and we have some local companies and then some Asian companies that have been investing very heavily for some time. Something similar is happening in Mexico. We have been competing with Amazon since 2017, but there aren’t that many local players. Yes, there’s a lot of competition on the financial side, but the reality is that these are two great markets and we’re doing very well. Although we have gained market share, continue to generate strong returns in all our businesses, and continue to grow strongly, we are investing heavily and making decisions that we believe are the right thing to do in the long term, regardless of the short or medium term results. There are also other countries, such as Chile, Peru, and Colombia, which are smaller but are developing steadily. But given that Internet penetration in retail is still very low, we are talking about a 15% level with a lot to gain, where you can perfectly coexist with your competitors, as is happening in all industries around the world.
-Which country is the most profitable?
-Argentina. Because we’re not competing with Amazon or the local giants, but we’re already competing with Asian players. Brazil and Mexico are putting more resources into logistics, employing about 42,000 people compared to 5,200 here. The company has a total of 110,000 employees. We are making significant investments in our entire logistics network.
– In Argentina, we just expanded what we already have in the central market…
-Operation started last week. This is great news for Argentina. It was 65,000 square meters, but now 58,000 square meters have been added, making the total over 100,000 square meters, and the following week, October 16, we opened a 30,000 square meter center in the city of Torres de Febrero, where Diego Valenzuela is located. But it took us seven years to open our second storage center here, and now we have 20 storage centers in Brazil and 14 in Mexico.
– And why is there this difference?
-Country conditions, first, competition; second, Brazil and Mexico require more efficiency, faster and lower costs. However, logistics is not a business in itself, but rather its role is to help customers have a good experience and want to buy again.
-Sellers are dissatisfied with the fees charged…
・At first, there was no charge, but of course nothing was sold. Then they started charging 3%, but there was no logistics solution, no payment solution, no financing for the buyer, no fees. You can’t use it, and that’s completely up to opinion. Setting fees that are too high will discourage sellers and leave buyers with fewer options when making a purchase. We seek a balance that serves buyers, sellers, and the free market to continue creating demand so that these sellers can continue to sell.
-Why did you switch from digital finance to banking?
-We are moving forward with that process in both Mexico and Argentina, where we first applied for a banking license. We just got our first credit card issued a month ago. We’ve been doing this for three or four years or something like that in Brazil and Mexico, and we’ve had great success, we’ve seen great growth, we’ve had great expectations. However, what cannot be done is financing, so-called financial intermediation. That’s why we want to operate as a bank.
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